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CNNMoney: Big Money Is Betting on Housing

By Michael Kling   |   Tuesday, 05 Feb 2013 11:47 AM

Big money is betting big on housing. Hedge funds and private equity funds are jumping into the housing market, betting that residential real estate is recovering.

They’re investing in all sectors of the housing industry, including homebuilders, land, foreclosed homes and building-parts manufacturing.

Some investors specialize in buying cheap foreclosed homes.

Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.

For instance, Blackstone Group has purchased 17,000 foreclosed single-family homes, CNNMoney reported. Pine River Capital Management’s new real estate investment trust, Silver Bay Realty Trust, is carving out a niche in buying, renovating, renting out and managing single-family homes. It has bought over 2,500 homes and plans to purchase another 3,100.

“A lot of investors see a short window of opportunity where there’s good inventory on the market at bottom market prices,” Foreclosure.com CEO Brad Geisen told CNNMoney. “No one knows how long it will last, so these investors are trying to buy as much as they can right now.

Hedge fund manager John Paulson, CNNMoney noted, has purchased undeveloped land in California, Arizona and Nevada, all areas that were hit hard by the housing bust.

“Land is the accordion in the home building equation,” Michael Barr, head of Paulson’s real estate investments, told CNNMoney. “It falls the most in a downturn, but also rises the most in an upturn.”

With most housing markets recovering or stabilized, financial markets are looking favorably on homebuilders. Stock values of homebuilding companies, like PulteGroup, KB Home and Lennar, have rebounded with the housing market, in some cases doubling over the past year.

Some homebuilders are going public. For instance, Tri Pointe Homes recently raised $232 million in an initial public offering.

Others are expected to follow. “As the sector rotates back into favor again, it makes sense for housing companies to monetize,” Brad Miller, co-head of global equity syndicates at Deutsche Bank, told CNNMoney.

Home prices had their largest monthly year-over-year gain in over six years in December, according to real estate data provider CoreLogic, Reuters reported.

CoreLogic’s home price index was up 0.4 percent in December over the previous month, and 8.3 percent over the previous year, the most since 2006, Reuters reported. Home prices increased 7.5 percent from the previous year if distressed sales were not counted.

“We are heading into 2013 with home prices on the rebound,” stated Anand Nallathambi, chief executive of CoreLogic. “The upward trend in home prices in 2012 was broad-based with 46 of 50 states registering gains for the year. All signals point to a continued improvement in the fundamentals underpinning the U.S. housing market recovery.”

Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.

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